2017 (4) TMI 959 - AT - Income Tax

Penalty for Incorrect Tax Claim Set Aside - Claim Must Be Legally Sustainable

The Tribunal set aside the penalty imposed by the Assessing Officer under Section 271(1)(c) of the Income-tax Act, 1961, on the appellant for inaccurate ... Penalty levied U/s. 271(1)(c) - false claim of exemption of LTCG under Section 10(38)- Held that:- Now when the assessee had made a complete disclosure of the purchase and sale of shares of M/s Talent Infoway Limited in her return of income, the genuineness and veracity of which set of transactions had been accepted by the CIT(A) and all adverse inferences arrived in the said context by the A.O. had been set aside and put to rest, therefore merely for the reason that the LTCG emerging on the sale of the aforesaid shares had been claimed by the assessee as exempt u/s 10(38), the same in itself would not tantamount to concealment or furnishing of inaccurate particulars of income by the assessee. We thus in the backdrop of the facts involved in the present case hold a strong conviction that an incorrect claim in law by the assessee, wherein the latter after disclosing the complete details of transactions in respect of purchase/sale of shares of M/s Talent Infoway Limited (supra), had therein claimed the LTCG relatable to the said scrips as exempt under Section 10(38), cannot in itself lead to levy of penalty under Section 271(1)(c). That our aforesaid view is fortified by the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Reliance Petroproducts (Ltd.) (2010 (3) TMI 80 - SUPREME COURT) held that mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. - Decided in favour of assessee Issues:1. Confirmation of penalty under Section 271(1)(c) by CIT(A)2. Consideration of facts and willful concealment3. Claim of exemption under Section 10(38) and penalty imposition4. Appeal against penalty imposition and arguments presentedIssue 1: Confirmation of penalty under Section 271(1)(c) by CIT(A)The appeal was directed against the order of CIT(A)-25 confirming the penalty imposed by the Assessing Officer (A.O.) under Section 271(1)(c) of the Income-tax Act, 1961. The appellant challenged the penalty levy of Rs. 1,14,970.Issue 2: Consideration of facts and willful concealmentThe appellant contended that accurate particulars were filed, and it was not a willful concealment. The appellant highlighted that the facts were disclosed, and the mistake regarding Security Transaction Tax (STT) payment was unintentional.Issue 3: Claim of exemption under Section 10(38) and penalty impositionThe A.O. disallowed the claim of Long Term Capital Gain (LTCG) exemption under Section 10(38) due to off-market transactions without STT payment. The A.O. imposed a penalty under Section 271(1)(c) based on inaccurate particulars and income concealment.Issue 4: Appeal against penalty imposition and arguments presentedThe appellant appealed the penalty imposition, arguing that the LTCG claim was based on a genuine misconception and all facts were disclosed. The appellant cited the acceptance of transactions by CIT(A) and emphasized the inadvertent nature of the claim.The Tribunal observed that the genuineness of the transactions was established, and the appellant had disclosed all facts regarding the sale of shares. Despite the incorrect claim for LTCG exemption, the Tribunal held that it did not amount to concealment or furnishing inaccurate particulars. Referring to legal precedent, the Tribunal emphasized that a claim not sustainable in law does not automatically lead to penalty imposition. Consequently, the Tribunal set aside the penalty imposed by the A.O. in the hands of the assessee.In conclusion, the Tribunal allowed the appeal of the assessee, quashing the penalty imposed by the A.O. The judgment was pronounced on 12/04/2017.